AMP has said it will soon launch a new life insurance product that will not use medical definitions, as the company continues to overhaul its life insurance business.
The firm's underlying profit was $513 million for the half year to 30 June 2016, down 10 per cent from $570 million for the half year to 30 June 2015. The dip in profit was attributed to higher claims in AMP's wealth protection business and volatile investment market conditions, AMP said.
During a media briefing yesterday, AMP chief executive Craig Meller said the company is taking steps to remediate these “disappointing” results. One of those steps includes the roll-out of a new life insurance product that will be “simple for consumers to understand” and will not rely on medical definitions, he said.
“What we're trying to achieve in the product is a solution that says if you are no longer able to work, and you need to restructure your lifestyle, this product will assess that requirement, rather than [saying] 'you have to have a heart attack to a certain prescribed definition in order to get a payment',” Mr Meller said.
“That's pretty different to the way life insurance, particularly TPD and trauma, has been defined historically. So it's a big change and that's why we're taking a very incremental approach to introducing this product.”
Mr Keller added that the product is intended to bring down “long-tail claims”, which are the most costly to the company and therefore improve performance.
“A significant component of the structure of the product is to work with the individual claimant on a rehabilitation program, because we know that if we can rehabilitate and get them back into the workplace faster, they will be healthier longer term,” he said.
When asked whether the proposed LIF reforms are expected to have an impact on the business, Mr Meller said he believes they will bring the cost of insurance down.
“I'm not sure if it will have much change to the absolute level of profitability but the change in remuneration arrangements will make life insurance less capital-intensive going forward because the life insurer will have a lower level of upfront costs in setting up a life insurance policy,” he said.
“What we'd expect is that over time that lower capital intensity will work through to lower prices for customers.”
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